Lawmakers respond to C-J's tobacco tax editorial

Joe Bowen

Thank you for the opportunity to respond to the Courier-Journal's article and follow-up editorial concerning House Bill 361. Some relevant facts were omitted from what was published about the bill.

The legislation we passed this year fixed a tax imbalance unintentially created in a tax modernization bill passed in 2005. The 2005 bill created loopholes and gave an unfair advantage to companies that sell moist snuff, one of many "other tobacco products"(think chewing tobacco, plug tobacco, moist and dry snuff, etc).

Generally, the General Fund receives just over $21 million a year in taxes from the sale of such products. Information provided to the Appropriations and Revenue Committee showed that Kentucky was not receiving any state tax on as much as 25 percent from those products sold in the state. For some specific tobacco products, nearly half were being sold to consumers without the state ever receiving a cent in taxes. That was a problem that needed to be fixed.

The process we followed was open and transparent. We asked representatives from tobacco manufacturers, retailers, wholesalers, and the Department of Revenue to present a legislative package that would close loopholes in tobacco tax collection and create tax fairness for other tobacco products. Those who worked to create HB 361 should be commended for their work. It isn't often that tobacco companies present to the legislature a solution to basically tax them more, but that's exactly what happened.

Estimates are that HB 361 will add as much as $4 million a year in tobacco taxes our state collects. This bill will increase tobacco tax revenue, not decrease, as the article would lead you to believe.

The news article focused on one aspect of the bill and painted this legislation as a special favor for one manufacturer. Nothing could be further from the truth, and we strongly dispute that assertion.

Regarding the chewing tobacco tax, since 2005, Kentucky has taxed dip at a flat 19 cents per can. Meanwhile, other similar products have been taxed based on percentage of their price, meaning the tax varies from product to product. This disparity creates confusion in the way we collect tobacco taxes, and HB 361 will lead to similar tobacco products (moist snuff, dry snuff, chewing tobaccco, twist and plug tobacco and snus) being taxed equally and fairly. While we are proud that every pouch of Red Man Chewing Tobacco sold in the world is manufactured by more than 300 hard-working Kentuckians in Owensboro, our decisions were based on creating fairness, not offering a special break to a specific company.

We also strongly dispute any notion that anyone tried to mislead members of the General Assembly. Attached to HB 361 was a fiscal note and a detailed description of the bill that was available for review by any senator, representative, or member of the general public. The third line of the Legislative Research Commission summary clearly states the tax on chewing tobacco would become 19 cents per pouch.

This topic was discussed in committee in the broader context of the bill, and everyone, was offered a chance to speak for or against the legislation at that time. There was no effort to mislead or otherwise stop this information from being known by anyone prior to votes in committee or on the floors of the respective chambers.

From the date the bill was introduced until today, we have not received one communication from health advocates, including the Campaign for Tobacco Free Kids, despite their spending nearly $10,000 for lobbying this past session. Regarding their assertion that HB 361 could lead to more kids using tobacco products, it is illegal in Kentucky for anyone under the age of 18 to purchase any of these products, and we expect that law to continue to be enforced. This legislation will have no impact whatsoever on tobacco use by minors, and any assertion otherwise is an uninformed, knee jerk reaction to a flawed reading of the bill.

As leaders in the Kentucky General Assembly, it is our responsibility to ask the state to do everything possible to collect taxes that are already on the books. The bottom line is that HB 361 fixed loopholes, created tax fairness, and will actually add millions annually in tobacco tax revenue to the state's coffers. It is good public policy, and we are proud to have been a part of it.

REP. RICK RAND

Chairman

House Committee on Appropriations and Revenue

SEN. JOE BOWEN

Chairman

Senate Committee on State and Local Government

REP.TOMMY THOMPSON

House Majority Whip

Frankfort, Ky. 40601

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Lawmakers respond to C-J's tobacco tax editorial

Thank you for the opportunity to respond to the Courier-Journal's article and follow-up editorial concerning House Bill 361. Some relevant facts were omitted from what was published about the bill.